Jeremy Gardner: ‘Bitcoin Is No Different Than Money Systems Today, Except That It May Be Better’

Known in mainstream media as a young “Bitcoin millionaire,” within the crypto and blockchain industry, Jeremy Gardner is a known more for what he does than how much he makes.

As a serial blockchain entrepreneur, educator and investor, Gardner has founded the global educational nonprofit the Blockchain Education Network and co-founded the blockchain-based prediction platform Augur. Most recently, he launched his own impact investing fund called Ausum Ventures.

Breaking down mass adoption

Olivia Capozzalo: Can you walk me through what mass adoption is — not from the tech or building side of things, but from the side of regular people? What does it look like? What does it mean?

Jeremy Gardner: So, my point during the panel discussion was that mass adoption has nothing to do with education. Mass adoption has to do with building products that people want. Mass adoption happens no other way.

You don’t suddenly educate hundreds of millions or billions of people on the virtues of decentralization and libertarian values and then expect that it is going to make them want to use Bitcoin or use blockchain-based applications.

No. What you’re going to do is create tools that people want in their lives that they don’t have today.

The reason why Bitcoin was initially adopted — the reason why Bitcoin and blockchain technology exists today — is that it exists for primarily one reason and one reason only. People don’t like to say this, but it’s because of the dark markets.

If there was no Silk Road, if there was no reason for people to actually buy and use Bitcoin to buy drugs online, I’m not sure it would exist today. I think otherwise it’s just a libertarian, cypherpunk thought experiment.

It was only once individuals in the developed world actually had a purpose for acquiring these crypto tokens to exchange in commerce that Bitcoin achieved meaningful value — once people understood that Bitcoin allowed people to do something they could not do before.

There are other examples in Cyprus, Venezuela, and Zimbabwe — places that have had really awful hyperinflation — places like India with demonetization, China with capital control, South Korea with capital controls.

The use cases have emerged, but initially, you know, initially the use case of Bitcoin was buying drugs on the internet, and that was great. But it didn’t actually have to do with the underlying ideological ethos that its earlier adherents had been attracted to.

And that’s going to be true with all blockchain technology. We’re simply going to build tools that people want in order to get adoption. No ideology, no education about the virtues.

We could try to act like missionaries and spread the word like a religion, but it’s not the best way to do things. As long as we build tech that people want, they will come, and they will adopt it.

Watch the full interview with Jeremy Gardner here:

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Crypto vs. fiat in crime

OC: It’s just funny because I spoke with Jason Bloomberg recently who also says Bitcoin first became popular for buying drugs on the darknet. But he says that’s a problem, and we need to do something about it — we need to outlaw or ban permissionless cryptocurrencies.

JG: Well, that is beyond idiotic. First of all, the DEA (United States Drug Enforcement Agency) recently said that use cases of blockchain technology and cryptocurrencies — or crypto assets, in particular — have dropped from 90 percent [80 percent] being black market to 10 percent today. And it’s only going to get lower because, guess what? blockchains are publicly transparent ledgers.

The whole value of public blockchains are these transparent, immutable, censorship-resistant ledgers that allow for an open world of finance — compared to the closed world of finance that we have today.

I mean, look at what Credit Suisse did in Mexico. They literally made deposit boxes so cartels could fit massive boxes of cash into them. It’s not like the current financial system is protecting us from organized crime and criminal activity.

I mean, who is paying more in fines for fraud than anyone in history? I mean, it’s JPMorgan. These banks are not a better system than today. The financial system today is much more culpable for things like terrorism and crime than blockchain technology perhaps ever will be.

You know what can be used for illegal activity and is actually is used for illegal activity more than anything else in the world?

OC: USD?

JG: $100 bills. Benjamins. More than 80 percent of black market activity is used with American $100 bills. Should we go and ban the dollar? I don’t think anybody in their right mind would argue that — I would, because Bitcoin would go up. Come on, I mean, that is just an absurd statement!

I mean, look, Bitcoin is digital cash, digital gold — whatever you want to call it. It is an online form of value. It is no different than the money systems that we have today, besides the fact that it may be better.

Technology is morally agnostic. It can be used for good, it can be used for evil.

I think collectively — as a community — whether you have that impact thesis or not, you should aim to invest in technology that makes the world better, because blockchains are all about network effects. And so, to suggest that we should ban it, to me, is just mind-boggling. I could never get behind such an option.

OC: I fully agree with you.

Porn and radical innovation

OC: I’m wondering about something like Pornhub using crypto — in terms of what that does for adoption. Is that something that you think is important or impactful?

JG: So, I’m very biased here. I know the MindGeek [Pornhub’s parent company] guys. I’m not a huge fan of the porn industry, but they got in touch with me and told me that they want to get involved in this space. I was nothing short of thrilled.

If you think about what the porn industry has done over the past two decades when it comes to technology adoption, it’s mind-boggling.

I mean, they are the reasons why we used VHS. They are the reasons why we used DVD over Betamax. They have increased streaming capacity and the capacity of content delivery networks more so than any other technology company on the planet.

Porn companies are technology companies. They have been radical innovators in the world of tech.

If they show this technology works — I mean, they are one of the largest content delivery networks on the planet — if they show this tech works, other content delivery networks that may not be in not such a sketchy industry may adopt as well, and they will see a massive upside and increase of their holdings.

So, look, I feel very ambiguous about porn — I’m not a huge fan of it — but their ability to be, kind of, thought leaders and trailblazers in the space is remarkable. And they have historically been in the world of tech, and internet technology and even cinematography.

A lot of other industries are very nervous about adopting blockchain tech because it’s so new, it’s so cutting-edge, and they don’t want to piss off shareholders — they are the largest tech companies in the world. But guess what? MindGeek is privately owned and they have more of a capacity to innovate and adopt new technology than a lot of the big, publicly traded companies that are out there. So, I’m hopeful.

Who needs blockchain?

OC: So, to get a little bit of a bigger picture than the entertainment industry — who needs blockchain adoption? What does it mean that they need it?

JG: Who needs to learn about blockchain technology and who needs it are different. It’s the disenfranchised who need blockchain technology.

And when I say disenfranchised or disadvantaged, I mean a massive subset of the world’s population. I mean, pretty much everyone except for me — like, a white, middle-class, heterosexual man who lives in the United States, who lives in San Francisco. Unless I want to buy drugs off of the internet, I literally have no really strong use cases. Maybe decentralized prediction markets are an exception.

But for the two billion people in the world who have no access to financial services and the four billion that have limited access — that includes that initial two billion — that’s what blockchain technology is made for. That’s where we will see the real adoption.

The ability to have a bank account in your pocket, to have something that is secure and safe in your pocket, cryptographically, in a way that money under your bed or behind your wallet is now — that is revolutionary.

It affects the people that are dealing with predatory institutions — whether they are governments, whether they are financial services, businesses or, you know, governments that exploit their positions of power as middlemen to disenfranchise their consumers and their users.

Because what blockchain technology affords is radical disintermediation.

Blockchain technology is the most radically disintermediated technology that’s ever existed. In that, if you want to transfer value — whether it’s money, the title to your house, the rights to your land — you can now do it in a way that only requires a single counterparty: the person who’s buying it from you.

And that is a massive upgrade from the world that we live in today, in which all sorts of clearing houses and third-party institutions that are necessitated due to a lack of trust in transactions. But with blockchain technology, you can actually have trustless financial or value exchange.

Now, how do we get there? It’s not entirely clear. You know, with remittance solutions today, trials today, about giving directly to folks such as this, but we’ve historically primarily been building the blockchain technology for the people that need it least: you and me, people in the United States, people in the West.

And that’s not where the blockchain technology is going to have its biggest impact.

But first, we need to be bringing in entrepreneurs from these places where they are disenfranchised. Bringing the disenfranchised and having them build products out of their own experiences.

That way it can be paired with technology companies in the West that are probably most well-equipped to build this software and tech.

But, we need to include the people who have the most benefit from this technology, and we haven’t done a great job doing that, yet.

Blockchain and government

OC: And do you see that happening really on the private scale? How is regulation going to affect this process?

JG: We’ve convinced regulators that blockchain technology is the Holy Grail of everything. I don’t find regulators to be any sort of hinderance on getting this tech adopted.

Whether it’s in the EU or U.S., even in Africa or East Asia, governments are getting behind trials of this technology to improve the lives of their people — sometimes for more authoritarian purposes, such as distributed ledger-based money in China and Russia — but overwhelmingly, governments have actually been a massive catalyst for the adoption of trials with this technology.

What I do think about is how we do reach the people that need this most and actually understand how this technology can help them. And that’s just kind of a long-term undertaking that will require the help of many governments and NGOs to really understand.

Because entrepreneurs often have this problem, especially in this industry, where they create solutions for problems that don’t exist. What we have to do is be identifying problems and then seeing if a blockchain can help mitigate that problem.

The general answer is ‘no,’ but you have to take a problem-first approach. Trying to build solutions without problems is probably the greatest fallacy of Silicon Valley and beyond.

Path to mass adoption

JG: They’re going to do them, but they’re not cryptocurrencies in the traditional sense. They are distributed ledger-based, centrally banked money that is issued and monitored and controlled and validated by central banks.

I think there’s a lot of good evidence that suggests that central bank-issued cryptocurrency — crypto assets or e-money, if you want to call it that — actually would be better than the digital cash that we have today.

But it is the antithesis of what we’ve been building in the blockchain space/cryptocurrency space so far, because this is going to be incredibly Orwellian.

They’re going to see every transaction that’s ever been made, there’s going to be KYC (Know Your Customer) and they’re going to know who’s making those transactions.

And that, in fact, in my view, will be the greatest catalyst for the mass adoption of cryptocurrencies as we know them today, whether it’s Bitcoin or something else.

When there’s government-backed cryptocurrencies and we move to a cashless society in which there is no financial privacy in our daily financial transactions, that is when something like Bitcoin or a stablecoin — something that is not bank- or government-issued — will become popular. That’s when we’ll see mass adoption, not before.

You know, if Bitcoin were going to be mass-adopted this decade, it would have happened five years ago, three years ago. But it’s too volatile, it’s too hard to use, it’s too hard to understand.

But when people are forced to use it — because there’s no longer cash, which is kind of a grey economy and a massive part of the global economy overall — once that economy disappears in its current form without cash, which will happen over the next 50-70 years, that’s when we’ll see mass adoption of cryptocurrencies — decentralized cryptocurrencies — as we know them today.

Because people want to use cash. People want to make financial transactions that the government doesn’t know about — whether it’s paying your babysitter or your illegal immigrant.

OC: You think a lot of people care about that? I just feel like most people don’t care about their privacy.

JG: Literally, almost every family in America pays their nanny in cash and that nanny is not reporting it to the IRS and they are not reporting that to IRS. It is not uncommon that people want to do business in a way that is not being traced by the government or just want some privacy in their financial transactions — virtually almost every person on the planet.

The grey economy is absolutely massive, and the second you take away cash, it becomes much harder to engage in — especially if we’ve moved to a distributed ledger-based financial system, where not only is every transaction traceable, but it’s also tied to your identity, which is way worse than what we have today.

So, you really have to think about the ramifications of a world in which there is no cash, no ability to take place in an informal economy. That, for sure, will lead to the mass adoption of cryptocurrencies.

Outdated laws

JG: We need, kind of, an open sandbox for innovation before we’re really ready for a lot of regulations. But there are certain areas, like securities laws, where it would be great if we could, kind of amend them for the reality of these tokenized securities, which are a very new concept.

OC: How exactly?

JG: So, if you think about the securities today, the reason why they are so heavily regulated is that they are not transparent — you don’t have any insight into the cash flow except for quarterly reports.

But, in theory, a lot of use cases for tokenized securities could be securities that pay automatically based off of the revenue of a software project — like, I should be able to sell tokens from my software project that every user, every transaction goes back to investors, like a portion of revenue. It’s transparent, it’s immutable, it’s on blockchain.

And thus, I shouldn’t have file an S1 and take a company public to offer that to your everyday consumer. People should be able to buy that in an ICO [Initial Coin Offering] and gain access to upside of this new software company that I’m building, because it’s so straightforward how they get paid out — where the revenue or the dividends are coming from.

OC: Right, yeah. And there are just a lot more hoops to jump through. And the law is from the 1930s…

JG: Right. You generally have to assume that a law that was written in the 1930s with regard to financial regulations is going to be at least partly outdated by 2018.

Crypto markets and the media

OC: I still want to talk a little bit more about your personal opinions on crypto, not about regulation. You’ve definitely publicly stated that you own crypto.

JG: Yes. Most of my money is in crypto.

OC: Right. So there is the fact that governments, consumers — people on a mass scale — pay attention to crypto and blockchain in relation to its price.

The price of Bitcoin going up a lot in December got a lot of press, mainstream media started reporting on it, etc. Since you’ve been in it a long time, what do you say to that kind of reaction?

JG: You know, I was somewhere in the world — I was either in India or Greece — when the markets last dropped and I actually didn’t learn about the drop in market price for, like, several days.

I don’t pay attention to the price. I kind of knew from following crypto Twitter that there had been a price drop, but people, kind of, speak about it ambiguously.

I don’t care about the price at all. If there were any underlying investment fundamentals driving the price of the crypto assets, I’d be concerned.

In crypto, price fluctuations are just hocus pocus — it’s just totally sentiment-driven. Nothing really drives the price increases or decreases besides just, like, FOMO [fear of missing out] sentiment and irrationality in the market. I’ve got a hedge fund side of my venture fund and it’s performing pretty abysmally right now because we don’t trade. I don’t try to time the market.

What I do is I invest in crypto assets. I believe we’re going to change the world and I just stopped caring. I don’t pay attention.

OC: You personally never trade?

JG: No, look, I’ve been in the industry since 2014. I wasn’t in that early, I didn’t make my money in Bitcoin, I made my money in other crypto assets — a little bit in Bitcoin.

You know, I’m often lauded or labeled as a Bitcoin millionaire — not really how I made my money. I invested in technology that I really believed in — whether it was Ether or, back then, XRP at a much different price — and I just held them. I never thought about it, I never traded them, I never watched the volatility.

I mean, this whole trader ethos that permeates the industry is just flabbergasting to me. These are illiquid markets. A single individual, a single factor in the trade can totally move the market against the way your Elliot-wave analysis predicted it was going to go.

These are not like traditional financial markets, which are deeply liquid, which are based off of companies with really strong fundamentals, cash flow, P-to-E ratios — you don’t have any of that here.

What you have are very speculative commodities that are potentially going to change the world, but none of them are yet. You know, Bitcoin maybe being the exception. So, if you’re not investing based on the long-term value proposition of a crypto asset or some really fantastic insider information about what that announcement about the crypto asset is, you’re never going to make money trading.

You know, I’ve met a lot of smart traders back in the fall of 2017. I don’t know any of those guys today. These guys were not actually that smart.

Everyone is smart in a bull market. But the guys that are smart in a bear market — or a downward market — are the guys that actually have conviction in their investment.

Now, I may go double-down on some of my investments, but I’m surely not selling right now like many people are. But most people who bought crypto assets in the past year, they just bought it because, “Oh, I have a feeling that this one is going to go up,” but now it’s going down and they’re selling, and there’s panic in the market, and there’s blood in the streets, and I love it.

I just get such masochistic joy, like, “Oh, my net worth is down 80 percent,” but I’m not concerned because I know it’s going to go up another 10,000 or 100,000 percent because the investments I made are valuable.

It’s a massive failure on the part of our industry not to be cynical about these price rises. If you look at my interviews back in mid-late 2017, I was calling these ICOs insanity, I was calling the market insanity, It was irrational, it didn’t make sense.

OC: What do you think about the mainstream media’s involvement in all that?

JG: I mean, can you blame them? You have the fastest appreciating asset class in history just roaring and turning 26-year-olds like me into multi-millionaires. It’s a compelling narrative! You can’t ignore it.

There’s never been an asset class like this that has enriched so many normal people. It’s something that the news is of course going to latch onto. Because what does everybody want? Everyone wants to be rich overnight. Who wants to be a millionaire?

Like, everybody wants to make money and they want to make it easily. And so, there’s this incredible new investment class that’s turning average Joes into very wealthy people. They’re going to report it! You just can’t blame them.

Now, do I wish they educated themselves more? Yes, but it is not their job.

I mean, if you want to be educated on blockchain technology and crypto assets, you’re going to have to immerse yourself for 90 percent of your life for the next six to 12 months of your life before you even have a baseline understanding of how this tech works and what its real purposes are and how it’s used.

And so, to expect the mainstream media to be able to report this accurately is not particularly reasonable. Now, I wish they did a little bit better due diligence, but at the end of a day, you really cannot expect the media to do a very good job.

OC: Okay, but I more mean the effects of this media attention.

JG: I mean, they are awful because they bring average Joes, who have no idea what they are investing in, into this new asset class. I mean, god, I just do not want consumer investors investing in this.

I’d love larger institutions, I’d love people who want to go and educate themselves. Your average consumer is buying Tesla because they think Teslas are cool cars or buying Amazon because they use Amazon every day — hey, maybe they could be good investments, maybe bad investments.

But they are sure as hell not using Bitcoin in their daily lives, so it’s not something they should be investing in. You know, unless you understand what you’re investing in, you shouldn’t be investing in it.

Unless you have a very balanced portfolio — like, look I think everybody should put five to 10 percent of their investment portfolio into Bitcoin and Ether, maybe a couple of other crypto assets — but that’s because when you do that, when you put five percent of your investment portfolio into a highly speculative, uncorrelated asset class, you actually mitigate the overall risk of your investment portfolio simply because it is uncorrelated.

And thus, even a grandma should put a tiny bit of her investment portfolio in Bitcoin, but she shouldn’t be mortgaging her house to do it, and it shouldn’t be a huge amount of money. It should only be a very small, yet respectable amount of portfolio — just due to the historical performance of this asset class. But the media narrative has definitely driven people to put way too much of their money into crypto.

OC: I ask because people do argue that the mainstream media’s attention helps with awareness, or it’s something important for, again, mass adoption. But that’s why we have to clarify what mass adoption means.

JG: Yeah, like, what is mass adoption?

Mass adoption of Bitcoin as a payment system? Yeah right, not going to happen. Not any time soon.

Well I’m saying, when we go to a cashless society, people will really have a use case, but using cash is almost always going to be better than using Bitcoin today.

And so, mass adoption is not going to happen until we create tools that actually catalyze that adoption. But that’s certainly not where we are right now.